Europe In Auto Hell

Gloom pervaded European markets on Monday, after President Barack Obama's task force on the auto industry rejected restructuring plans from General Motors and Chrysler and the chief executive of PSA Peugeot Citroen stepped down.

The Dow Jones Euro Stoxx 50 index slipped by 3.5%, to 2045.25 points, with automobile stocks on the continent shedding 5.3% in morning trade. The London FTSE 100 fell by 2.6%, while the DAX declined by 3.6% in Frankfurt, and the CAC 40 was down by 2.9% in Paris.

Uncertainty over the fate of
General Motors
and Chrysler heightened as Washington prepared to unveil its plans for helping the automakers on Monday. GM and Chrysler, already recipients of $17.4 billion, had their turnaround proposals rejected on Monday, with the panel concluding that neither had submitted a viable plan and did not warrant substantial additional investments. Under pressure, GM Chairman and CEO
G. Richard
Wagoner
G. Richard Wagoner
announced that he was stepping down late on Sunday, with director
Kent
Kresa
Kent Kresa
taking over as interim chairman and deputy CEO
Frederick
Henderson
Frederick Henderson
stepping in as temporary CEO. In Frankfurt, shares of General Motors fell by 26 euro cents (34 cents), or 9.6%, to 2.46 euros ($3.24). (See "Obama Takes The Wheel In Detroit.")

Change at the top was also on the cards at French carmaker PSA Peugeot Citroen, which terminated the tenure of Christian Streiff as its chief executive on Sunday, citing "exceptional difficulties" in the industry. However, the move failed to boost confidence, with
PSA Peugeot Citroen
shares tumbling by 1.14 euros ($1.50), or 7.4%, to 14.21 euros ($18.72). Others in the sector also lost ground, with
Renault
losing 8.9% in Paris and Fiat sliding by 35 euro cents (46 cents), or 6.6%, to 4.92 euros ($6.48), in Milan. (See "Peugeot Citroen Dumps Streiff.")

Meanwhile, the banking sector also lost some of its recent gains, as news that the Bank of Spain would be taking over Caja Castilla la Mancha knocked investor confidence. The heavily regulated Spanish banking sector had been considered amongst the most resilient globally, with tight controls on the risks that the banks could take, so the near collapse of one of its regional banks was seen as a sign of how deep into the economy the financial crisis had seeped. Shares in the sector fell across Europe, with other Spanish banks leading the way. Shares in
Banco Santander
fell by 28 euro cents (37 cents), or 5.2%, to 5.06 euros ($6.67), in Madrid, while
BBVA
dwindled by 4.1%.

Given the uncertain outlook for banks,
Barclays
' decision not participate in the government's toxic asset protection program--as had been widely speculated--seemed particularly risky to the market, and shares of the British bank tumbled by 12.30 pence (17 cents), or 7.1%, to 161.50 pence ($2.28), in London.